Data Mining: Finding the Perfect Client

It might be easy for advisors to feel overwhelmed with all the data available to help them do their jobs. There's new software that tracks the tweets and Facebook activity of prospects and regular clients, plus old-school investing tools that keep tabs on hot stocks and sectors as well as the portfolios of their clients.

Now add one more chunk of information to assimilate: wealth databases. A small group of determined data miners are slicing and dicing the world of high-net-worth individuals to extract easily digested sets of prospects: officers at public companies with stock options, people with a certain amount of investable assets, those with expensive hobbies like golf or yachting, and so on.

A stunning (some might say alarming) amount of personal information is public. Sell a home, get married or donate to a certain cause; it's all recorded someplace that anyone can access. And the wealthiest people, despite their best efforts, leave the biggest trails of all. But the trouble is, much of that information is scattered all over the place, in nooks and crannies no one would think to explore. Enter cutting-edge technology.

One data company, WealthEngine, says it culls information from 35 data providers, including the SEC, Dun & Bradstreet and even, ironically, a do-not-mail registry. The 21-year-old firm claims to rank the wealth of everyone in the U.S. - not just the wealthy - with a database of more than 100 million households.

WealthEngine tracks more than 10 million people with a net worth of $1 million or more, according to James Dean, head of the company's luxury and financial practice. It often knows who's a gambler, who likes golf, who owns a private architecture firm - and, courtesy of the Coast Guard and FAA, who owns boats and airplanes. (Cars are trickier since the DMV is tight-lipped, but many owners of Mercedes and BMWs are all too happy to tell websites and magazines about themselves.)

And WealthEngine does custom searches for buyers of its data: It can assemble profiles and personal balance sheets for your prospects, listing assets (real estate, pension, stock holdings) and income, as well as information about spouses, children, age, education, ethnicity, and contributions to charities, political parties and candidates. Home and business addresses, email and phone numbers are there, too.

PUTTING DATA TO USE

WealthEngine says that, last year, one RIA firm requested a list of 500 ultrahigh-net-worth prospects, each worth at least $20 million, who had contributed at least $10,000 to the Democratic National Committee. The firm then invited these high rollers to an exclusive $10,000-a-plate fund-raising dinner with President Obama in New York.

Such surgical precision comes at a price. In addition to picking up the tab for the tables, the firm paid $7,500 for the custom search that identified the prospects.

Was it worth it? If the firm gained even one client, the fees generated from managing that one account would likely amount to a couple of hundred thousand dollars a year. (WealthEngine declined to name the firm, or say whether it had picked up any new clients.)

More common, say companies, are simpler data runs costing about $3,000. One sample query, for instance: all prospects of Hispanic descent living in New York or Los Angeles with more than $15 million in investable assets. A search like that will likely generate 10,000 names, and will cost about $5,000. But services are offered at a wide range of prices. A large advisory firm might spend $250,000 annually on data searches, Dean says.

'EMBARRASSING' DETAIL?

San Diego planner R. J. Kelly, the founder of Wealth Legacy Group, first heard about WealthEngine from a friend in the philanthropy world. The woman, who ran a foundation, said that whenever she heard of a possible new donor, she plugged the name into WealthEngine.

Kelly says he really sat up and took notice during a demo by a Wealth-Engine salesman. Just for fun, Kelly asked for information on several of San Diego's biggest names, including Irwin Jacobs, founder of Qualcomm. For those who owned large blocks of publicly traded stock, the information was all there - including Jacobs' $2.1 billion in Qualcomm and other holdings. But that wasn't all.

"It was fascinating. ... It told me not only the amounts of money he gave, and to whom, but also whether it was cash or stock," Kelly says. "It was almost a little embarrassing to look at that much detail, but it was public."

The database's next trick also impressed him. He asked for all the individuals with $10 million or more in the Mission Valley area of San Diego, and it spat out about a dozen names. "So here's my target list - pretty extraordinary," Kelly says.

Kelly, who plans to take the plunge with WealthEngine this year, is unusual: Most advisors who use these tools prefer not to discuss them. But for those considering signing up - even stealthily - here's a guide to some of the other big players.

FOCUS ON COMPENSATION

Equilar Atlas is a database company specializing in executive compensation. It started a dozen years ago, growing out of a compensation consultancy serving the human resources and corporate governance communities. Its database of 300,000 individuals, culled from SEC forms, allows advisors to see upcoming milestones for clients or prospects: when their shares vest, when they get an equity grant, as well as when they are promoted or resign. All this information can be delivered in customized alerts.

The database also builds out vesting schedules. Typically these schedules last four years, but can go much further out: For example, Apple CEO Tim Cook has a restricted stock grant that vests over 10 years. (The estimated value of that package is in the range of a half-billion dollars, for those advisors thinking of calling on him when it comes due in 2021.) "It's competitive out there, and some of these executives have multiple advisors. If you can be the first one to engage and provide an idea or good advice for the client to think about over the next year or two, you might be at an advantage," said Brian Sohmers, who heads Equilar's Insight business unit.

The data also tracks events as far back as 10 years that a client might not have told advisors about - for example, whether they sold stock. So for advisors who don't have all of a client's wealth mapped out, the database can help fill out the picture.

The company charges for its services on a seat-based model, with a few options; the base price tag is $2,400 for an annual subscription.

DEAL HUNTING

High Net Worth Insight operates on a similar idea, but searches more broadly with an eye to the mergers and acquisitions market. In addition to keeping a database of executives and shareholders through SEC filings, the tool's owner, Infinata (a unit of publishing giant Pearson), employs 200 journalists to track the market for M&A deals, then try to predict which private companies will go public or get bought (and by which of their competitors).

The company also tracks layoffs, so advisors can use the information to offer to roll over clients' 401(k) plans. The company claims it tracks more than 1,000 public sources, from SEC forms to niche industry publications such as Women's Wear Daily. "Anything from company press releases to journals that's out there, we'll go a few steps further," says Pablo Lopez, the sales director for Infinata's wealth division.

The company assigns prospects a proprietary wealth score, and uses it to estimate each person's investable assets. The algorithm does not include real estate or physical assets like cars or boats, but will give an advisor a sense of how wealthy a prospect is. The ranges include $250,000 to $1 million, $3 million to $5 million, and $5 million and up.

The tool also includes a referral center that identifies which existing clients may know a prospect - through sitting on the same boards of foundations and endowments, having worked together or even having attended the same conference.

A new feature also lets users search for a wide variety of characteristics - prospects who are military veterans, for instance, or grandparents (who might be setting up college funds). Advisors can create a profile of characteristics they want in a client, and the service will email them every time someone matching the description moves to their area.

It also provides an integrated CRM for those RIAs at small firms that cannot afford Salesforce. Advisors can buy a single-state license for $4,000, or a national one for $10,000.

OUTGROWTH OF FORBES LIST

Wealth-X grew from the team at Forbes that compiled the magazine's famed list of the world's wealthiest people. Wealth-X focuses on individuals with $30 million or more, reckoning there are 185,000 such people in the world. Its global database contains information on individuals who hold $10.7 trillion of the world's wealth.

The bespoke profiles it compiles on prospects are painstakingly compiled by about 175 researchers, says David Friedman, the firm's co-founder and president. These researchers manually build an estimate of the prospect's net worth, including all the publicly available data as well as a lot of homemade figures. Researchers try to pinpoint the current market value for homes owned, rather than the value declared on tax forms; analysts build valuation models for private firms using revenue figures or data on comparable public companies. The estimate also pulls in everything else the researchers can find, such as art collections and horses.

Wealth-X staffers also flesh out a mini-biography, digging out personal nuggets, such as that an individual "likes to land his plane in tumultuous water" or is "driven to help solve this issue in India because his daughter died when she was 6." This kind of research has been used for fund-raising campaigns at Ivy League schools, and the company says it works with eight of the top 10 global private banks.

These deep dives don't come cheap. An annual subscription can be in the six or seven figures for a big office, although Wealth-X also works with independent RIAs or smaller family offices, who might pay a more modest $12,000 to $15,000 a year.

Friedman argues that the high price tag is worth it. "When you sit down, you want to understand the client's heart and mind. We say our dossier is the conversation before the conversation," he says. "You're talking and interacting with that person before you actually sit down with them."

An earlier version of this story said incorrectly that, in compiling dossiers, Wealth-X workers make phone calls to gather research information. The company says it solely uses open-source information for its dossiers.

Elizabeth Wine, a writer in Brooklyn, N.Y., has contributed to the Financial Times, Barron's and On Wall Street.